Using ecological indices to measure economic and environmental performance of irrigated agriculture

Growing public concern about the health of rivers and wetlands, and the ecosystems they support, puts pressure on large water users-such as the irrigation industry-to find ways to use less water. At the same time, the growing competitiveness of the economic environment places demands on the industry to maintain its productivity and profitability. This study develops a method, based on the concept of an environmental performance index (EPI), to measure the economic and environmental performance of irrigated agricultural enterprises. In defining environmental pressure exerted by the irrigation industry the method incorporates certain characteristics of ecological assets affected by water withdrawal for irrigation. As an empirical application, the method was applied to a case study of seventeen natural resource management (NRM) regions within the Murray-Darling Basin (MDB), Australia. Data Envelopment Analysis was used to compute the component distance functions in order to construct an EPI for each considered irrigated enterprise in each NRM region. The results of the analysis show that environmental efficiencies of irrigated enterprises vary considerably across NRM regions. These findings support the case for policy targeting by type of irrigation enterprise and by location of enterprises.